Shanghai Communique v. Sino-US Economic and Trade Relations

China and the US regard bilateral trade as another realm that can bring about mutual-benefit and unanimously agree that an economic relationship based on equality and mutual benefit is in the interests of the people of the two countries. They agree to provide conveniences for gradually developing trade between the two countries.

The 30th anniversary of the publication of the Sino-US Shanghai Communique is a memorable date. It marks the beginning of the process of the normalization of Sino-US relations. It is the need for both the defense of world peace and promotion of the economic development of the two countries. With regard to the latter, the communique says: Both sides regard bilateral trade as another realm that can bring about mutual-benefit and unanimously agree that an economic relationship based on equality and mutual benefit is in the interests of the people of the two countries. They agree to provide conveniences for gradually developing trade between the two countries. Over the past 30 years, this agreement has been satisfactorily carried out and has been crowned with remarkable achievements.

Figures are most convincing. In 1978, a year before the formal establishment of diplomatic relations between China and the United States, the total volume of Sino-US trade was only US$991 million, by 2000 the figure had gone up to US$74.4 billion, an over 70-fold increase. While in the same period, the total volume of US foreign trade increased only 5-fold. For example, in the three years between 1979 and 1982, there were only 23 US-invested projects in China, with actual volume of investment standing at US$118 million, by 2001 there had been more than 20,000 such projects, with the actual volume of investment reaching US$35.548 billion, a 298-fold increase. These figures indicated that Sino-US trade and investment activities progressed by leaps and bounds.

From Sino-US economic and trade development, we have seen not only sustained development, but also phased development. A rough division shows that the period from the beginning of the establishment of diplomatic ties between China and the United States to 1992 can be counted as a stage. Numerically speaking, around the time of 1992, there was leaping growth whether in terms of trade or of investment. With regard to trade, from 1978 to 1992, China's export to the United States grew at an average annual rate of 8.6 percent, by 1992, the gross value of exports hit US$8.59 billion, which was an uncommon achievement. However, in 1993 the volume of China's exports suddenly shot up to US$19.664 billion, a 1.28-fold rise over the previous year, with the figure rising from two digits to three digits. In regard to investment, between 1979 to 1992, US direct investment in China ranged roughly between US$300 million and US$600 million each year, in 1993, the figure ballooned to US$2.06 billion, a 3.16-fold rise over the preceding year, jumping from one digit to two digits.

Behind these figures were the in-depth development of China's reform and opening up drive, the continual growth of its economic strength, the gradual improvement of its investment environment, as well as the increasing transparency of its various policies. On the American side it was its awareness of the Chinese market potential, its understanding of the Chinese government's policies as well as US enterprises' successful practice in investing in China. Here an important promotional factor was Comrade Xiaoping's speech given during his inspection tour of south China in 1992. He told the world that China's reform and opening up policy was irreversible, its market economy orientation would absolutely not be shaken, thus enormously enhancing American enterprises' confidence and determination to develop economic and trade relations with China. This can be seen most clearly from the attitude taken by large US transnational companies toward investing in China. In the 80s , three major US auto companies and the US Telephone and Telegraph Company were all hesitating in making investment in China, thus losing the first business opportunities to Japanese and European companies. After 1992 these US firms took an about-turn, their chief executive officials came in large numbers to China to seek cooperation, they spent huge amounts of investment to set up a bridgehead for large-scale development, indicating the determination of them as the latecomers getting ahead of others.

China's WTO entry will boost Sino-US economic and trade relations to a new level. While commenting on the significance of China's WTO accession, the American "Fortune" magazine said: Now existing in many aspects of China is a kind of centripetal force of economic globalization-It is attracting capital and foreign companies at an ever-faster speed; in this process, in view of the country's inexhaustible cheap labor supply, as well as its astonishing rapid rise in the technology-food chain, it will mainly write many industrial economic records, To foreigners wanting to do business with China, entry into the WTO signifies 'greater transparency and observance of rules'. The above comments by the "Fortune" magazine represent American entrepreneurs' joy and expectations of China's WTO accession.

It is estimated that after China's WTO entry and through the common efforts made by Chinese and American entrepreneurs and governments, bilateral trade volume will top the level achieved in the latter half of the 90s. US exports to China will increase dramatically, particularly agricultural products as well as US superior industrial products, such as auto parts, paper and pulp, chemical raw material and other competitive products of the United States in the 21st century, will grow rapidly. There will also be increase in Chinese exports to the United States, but will be slower than the growth of US exports to China. Under this circumstance, existing US deficit of trade with China will be gradually reduced, which will be conducive to a balance in Sino-US bilateral trade. If the United States can lift its irrational restriction on the export of its high-tech products, it will make bilateral trade relations become more reasonable and more balanced.

In regard to investment, after China's WTO entry, US direct investment in China will witness rapid growth, particularly in terms of the service trade, because China has promised to systematically open its telecommunications, finance, insurance, wholesale, consultation and other fields, which are precisely the most superior realms of the American transnational corporations, there may be both ups and downs in direct investment, it is not a universal growth trend. Due to China's advantage of labor force, however, processing trade will still experience a vigorous development. In short, direct investment will be a market with tremendous potential, US direct investment in China will be in a leading position among various other countries.

Along with the strengthening of Chinese enterprises' international competitiveness, many Chinese companies will go to the United States to carry out their businesses or list on the American securities market to raise funds. No matter in terms of trade or of investment, the market potentials of China and the United States are extremely great, but to ensure the healthy development of the markets and bring their potentials into full play, it is still necessary for the governments and entrepreneurs of the two countries to give them careful protection.

The foundation of Sino-US economic and trade relations is the bilateral economic relationship of mutual complementation as well as the rapid development of the two economies, this foundation is stable. But along with the ever-closer bilateral economic and trade relations, frictions will also increase. The important thing is that on the premise of maintaining the general situation regarding Sino-US economic and trade relations, both sides should try to solve this problem through normal channels and by the method of negotiation. The United States should pay attention to guarding against the noises raised by a handful of people who interfere with the normal Sino-US economic and trade relations and against their attempt to politicize the economic and trade question, at the same time, both sides should take sincerity and faith as the base, conscientiously honor their commitments. In this way, the spirit of the Shanghai Communique will be further carried forward, the prospect for Sino-US economic and trade ties will be very bright.

This article, written by Chen Baosen, researcher of the Institute of American Studies under the Chinese Academy of Social Sciences, is published on page 3 of People's Daily on February 9.